Custom, Excise & Service Tax Tribunal
Bagga Distilleries Hyderabad Pvt Ltd vs Hyderabad-I on 8 April, 2024
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ST/25470/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Service Tax Appeal No. 25470 of 2013
(Arising out of Order-in-Original No. 60/2012-Adjn (Commr) ST dt.31.10.2012 passed by
the Commissioner of Customs, Central Excise & Service Tax, Hyderabad-IV)
Bagga Distilleries Hyderabad Pvt Ltd
34-B, Satamrai Village, Gaganpahad Mandal, ......Appellant
Rangareddy Dist, AP - 501 323
VERSUS
Commissioner of Central Tax
Hyderabad - I
Posnet Bhavan, Tilak Road, Ramkoti,
......Respondent
Hyderabad, Telangana - 500 001 Appearance Shri B. Venugopal, Advocate for the Appellant.
Shri K. Srinivas Reddy, Authorized Representative for the Respondent.
Coram:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30269/2024 Date of Hearing: 06.03.2024 Date of Decision: 08.04.2024 [Order per: ANIL CHOUDHARY] The Appellant herein - M/s Bagga Distilleries Hyderabad Pvt Ltd is engaged in manufacture of Indian Made Foreign Liquor (IMFL) and are registered with the Service Tax authorities vide STR No.AACCB3837HSD002 for payment of Service tax under the categories of 'Goods Transport Agency' and 'Business Auxiliary Service'. The appellant manufactures both for self and also on job work basis - contract bottling.
2. On the basis of the audit of records maintained by the Appellant, a Show Cause Notice in O.R. No. 207/2011- Adjn (Commr) ST dated 21.10.2011 was issued to the appellant by invoking the extended period of limitation and proposing to demand Service tax of Rs.1,05,54,037/- (Rs.88,69,793/- under the category of Manpower Recruitment Agency Service and Rs.16,90,769/- under Renting of Immovable Property services) for the period April 2006 to August 2009. The notice also proposed to demand interest and also to impose penalties.
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3. The above demands were confirmed on contest by the Commissioner of Customs, Central Excise and Service Tax, Hyderabad- IV Commissionerate vide Order-in-Original dated 31.10.2012. Interest was demanded under Section 75 and penalties were imposed under Section 76, 77(2) and 78 of the Finance Act, 1994. Being aggrieved, the Appellant has filed the present Appeal.
4. The Appellant were engaged in the manufacture/ processing of alcoholic beverages under job-work basis, for or on behalf of their clients, under manufacturing agreements dated 31.8.2004 and 27.3.2009 entered into with M/s. Allied Blenders and Distilleries Pvt. Ltd. ('ABDPL') (earlier known as M/s. Chhabria Marketing Ltd.) for bottling of Indian Made Foreign Liquor ('IMFL').
5. The case of the Revenue is that the manufacturing agreement mentions in clear terms in Clause 5 of the said agreement that "Bagga will be exclusively responsible for all manpower, skilled and unskilled required for running the unit and bear all expenses in this regard"; and therefore, it is not a mere manufacturing / job-work agreement but an agreement of providing man-power supply for manufacture of IMFL for M/s. ADBPL. The demand of Service tax was on renting of immovable property for the period 2008-2009 was for letting out of the manufacturing facility of the Appellant to ABDPL.
6. Learned Advocate has taken us through the manufacturing agreements clause by clause and in particular to the following clauses:
"3. a) Bagga shall in consultation with CML manufacture procure RS/ENA in accordance with standards and specifications set forth in the Annexure 5 and from suppliers approved by CML and in accordance with the standards and specifications setforth in Annexure B. Any change in such specifications/standards shall be in accordance with statutory requirements and/or mutually acceptable terms. The IMFL so manufactured shall be blended and bottled by BAGGA in its blending and bottling plant in accordance with the specifications laid down by CML from time to time in advance. The enable BAGGA to comply with the same, BAGGA shall register the labels to be affixed on the IMFL with the excise authorities in the State of Andhra Pradesh and obtain such permission/approvals from such competent authorities as may be necessary for the manufacture and sale of IMFL in accordance with Andhra Pradesh Excise Act and Rules.
"5. BAGGA will be exclusively responsible to arrange for all manpower, skilled and unskilled, required for running of the unit and bear all expenses in this regard. Similarly all other expenses towards utilities, overheads, and maintenance shall also be borne by BAGGA without any right of claim from CML.
13. a) The Bottling Charges payable to BAGGA for production of the brands as specified by CML, will be Rs. 30/- per case (Rupees Thirty (3) ST/25470/2013 only) for 'C' category brands and Rs. 25/- per case (Rupees Twenty Five only) for brands in other categories except for Dips (90ml x 96 nos.) which shall be paid at Rs. 50/- per case (Rupees Fifty only) produced. The Bottling Charges shall be payable to BAGGGA on or before the 10th of the succeeding month on realization of sales proceeds.
BAGGA will not be entitled to any other charges on any account for bottling such products.
The Bottling Charges above have been arrived at based on the Agreement between the parties herein that ENA manufactured by BAGGA at its redistillation Plant at Gaganpahad shall be made available for the manufacture of products specified by CML. The benefit derived out of such manufacture of ENA shall be passed on to CML by reducing the price of ENA and the exact rate to be worked out for such ENA shall be communicated by separate writing from time to time and shall always be deemed to be a part of this Agreement."
7. In view of the above clauses, the Ld. Advocate submits that, the Appellant is responsible for the manufacture/producing IMFL under the brands belonging to the CML in their own distillery, using their own manpower, skilled or un-skilled required for the manufacture of IMFL The IMFL so manufactured/produced shall be sold to CML or to the buyers specified by CML. The Appellant is paid at an agreed price on per case basis, of each category of the IMFL manufactured, as per clause 13(a) of the Manufacturing Agreement. The Commissioner in the impugned order has, thus erred to construe the manufacturing agreement as an agreement for manpower supply agreement. By no stretch of imagination the activity of service under the manufacturing agreement can be classified as "Manpower Recruitment or Supply Agency service" falling under Section 65 (105)(k) of Chapter V of the Finance Act, 1994, as amended.
8. The Ld. Advocate further invited our attention to the definition of "Manpower Recruitment or Supply Agency" under Section 65(68) of the Finance Act, 1994 which reads as "Manpower Recruitment Agency" means any commercial concern engaged in providing any service, directly or indirectly, in any manner of recruitment of manpower, to a client; and submits that in terms of the said definition, the essential ingredients for a service, to qualify as manpower recruitment agency are:
a) any commercial concern;
b) engaged in providing service in any manner of recruitment of manpower;
c) such recruitment service is provided to a client.(4)
ST/25470/2013
9. However, in the instant case, apart from being a commercial concern, none of the other conditions of manpower recruitment agency are satisfied in the instant case and therefore the services provided by the Appellant cannot be termed as 'manpower recruitment and supply' service. Relying upon the following decisions, it was prayed to set aside the demand.
a) CCE, Raipur Vs. Shyam Enterprises[2011 (23) S.T.R. 29 (Tri.-Del)]
b) K. Damodar Reddy Vs. CCE, Tirupati[2010 (19) S.T.R. 539 (Tri.- Bang.)]
c) S. S. Associates Vs. CCE, Bangalore [2010 (19) S.T.R. 438 (Tri.- Bang.)]
d) Divya Enterprises Vs. CCE, Mangalore [2010 (19) S.T.R. 370 (Tri.- Bang.)]
e) Ritesh Enterprises Vs. CCE, Bangalore [2010 (18) S.T.R. 17 (Tri.-
Bang.)]
10. With respect to the demand of renting of immovable property service, it is the contention of the appellant that the non-payment of Service tax was on account of the issue of 'renting of immovable property' was mired with controversies across the nation with several cases being filed in various High Court, until the issue is finally decided by the Hon'ble Supreme Court. During the material period, the Hon'ble High Court of Delhi in the case of M/s. Home Solution Retail India Ltd., Vs. Union of India - 2009 (14) S.T.R. 433 (Del.) has held that levy of Service Tax on 'Renting of Immovable Properties' is bad and not liable to Service Tax. The doubt regarding levy of tax on 'Renting of immovable property' was put to end by retrospective amendment by Finance Act, 2010 neutralising Delhi High Court judgment in Home Solution Retail India Ltd. (supra). Therefore, the Appellant cannot be accused of suppression of relevant information. Further such retrospective amendment is an outright acknowledgment of the fact that there was no clarity in law and a mechanism was provided later with legislative sanction. The Ld. Advocate therefore submits that the entire demand is barred by limitation and prays for setting aside the demand.
11. Learned AR relies on the order of the Commissioner. Further urges that from the terms of agreement making them responsible to arrange for all manpower, skilled and unskilled, required for running of the unit clearly indicates intention of the parties for supply of manpower. Such manpower required to work under the supervision of the brand owners - CBL. The services (5) ST/25470/2013 rendered by the appellant squarely fall under the category of manpower recruitment or supply agency but not under business auxiliary services. Further urges, a perusal of the debit notes raised on monthly basis by the appellant on CBL reveals that the appellant have been debiting the account of the said party towards reimbursement of expenses such as labour, power, fuel, water, repairs, maintenance and lease rent. Whereas the agreement for manufacture provides payment based on quantity manufactured/bottles on per case basis. Reimbursement arises in case where the manpower is employed on behalf of the other party for performing a job agreed upon.
12. On The issue of limitation submits that from the facts on record there is deliberate act on the part of appellant with the clear intent to evade payment of service tax which also cannot be attributed to entertaining of any doubt whether the services are taxable or not. The fact of rendering the services in question came to light of the Department only when the documents were called for verification.
13. Heard the parties. The demands in the instant case is two-fold, i.e., whether the appellant was providing manpower recruitment and supply agency services falling under Section 65 (105)(k) of Chapter V of the Finance Act, 1994, as amended and whether the appellant is liable to pay service tax on renting of immovable property for the period 2008-2009.'A careful perusal of the agreements entered into by the appellant and particularly to the clauses extracted above would clearly establish that in terms of the manufacturing agreement the Appellant is responsible for the manufacture/producing IMFL under the brands belonging to CML in their own distillery, using their own manpower, skilled or un-skilled required for the manufacture of IMFL and also the cost of running the unit including the costs of overheads. Further it is also very clear from clause 13(a) of the manufacturing agreement, the consideration received by the Appellant is based on the goods manufactured and not for the manpower supplied. This clearly establishes that the services are for contract manufacturing of IMFL and not for manpower supply services as held in the impugned order. No adverse inference can be drawn for the reimbursement of expenses received by the appellant from the brand owner. Our view is fortified by the precedent ruling in the case of S. S. Associates Vs. CCE, Bangalore [2010 (19) S.T.R. 438 (Tri.-Bang.)] and Divya Enterprises Vs. CCE, Mangalore [2010 (19) S.T.R. 370 (Tri.-Bang.)] (6) ST/25470/2013
14. We, therefore, do not find merit in the impugned order to demand Service tax on the manufacturing services provided by the Appellant under 'Manpower Recruitment and Supply service' and accordingly, the demand under the same is liable to be set aside, as held.
15. With respect to the demand of the renting of immovable property during the period 2008-2009, we agree with the Appellant that during the relevant period, the issue was disputed before various High Courts and finally ended up before the Supreme Court. Finally, the issue was put to rest by way of a retrospective amendment. This, itself, shows that there was lot of confusion on levy of tax on renting of immovable property service during the material period involved in this case. The normal period of limitation for the raising demand for non-payment of service tax as per Section 73 of the Finance Act during the impugned period is one year from the relevant date. The demand in this case is for the period from 01.04.2008 to 31.03.2009 and therefore the relevant date is the due date of filing of return i.e., 25.04.2009. Accordingly, the normal period of limitation will expire on 25.04.2010 and the show cause notice came to be issued on 21.10.2011. Thus, the entire demand of tax for the period 01.04.2008 to 31.03.2009 is barred by limitation. Accordingly, we set aside the demand of tax.
16. In view of our aforementioned findings and observations, we set aside the impugned order and demand of tax on both 'Manpower Recruitment and Supply Service' and 'Renting of Immovable Property Services'. All penalties are set aside.
17. Appeal allowed with consequential relief, if any, as per law.
(Pronounced in the Open Court on 08.04.2024) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (A.K. JYOTISHI) MEMBER (TECHNICAL) Veda